Willingboro homeless man jailed for $545,000 tax scam

Kenneth Costello almost got away with scamming the state out of nearly $600,000.

That is, until the chronically homeless man reported to police that a Willingboro bank teller had bilked him out of about $100,000 of his stolen cash.

When he reported the theft, authorities quickly turned their attention to Costello, who had lived in shelters and halfway houses and has a long history of hospitalization for mental illness, and how he amassed his small fortune.

The jig was up.

On Friday, Costello, 50, with no known fixed address, was sentenced in Superior Court to five years in state prison for first-degree money laundering in a scheme and downfall of his own doing.

“Yes, you’re indigent. Yes, you’re destitute. And yes, you’re mentally ill,” said Judge Jeanne T. Covert at the Burlington County Courthouse in Mount Holly, ordering him to serve the term with no chance of parole for at least two years. “But somehow you were able to pull this off and spend some of the money.”

When he pleaded guilty in September, Costello admitted that he had filed four fraudulent tax returns in 2008, netting himself $545,384 from the New Jersey Department of Treasury. He attempted the scam again in 2009, claiming he was owed $228,000, but the state rejected the return, officials said.

Authorities said Costello would move around from halfway house to halfway house and used a series of post office boxes while collecting his returns. Before his arrest in this case, the college-educated defendant had no previous criminal record.

With the state money he received, Costello opened accounts at a TD Bank on Levitt Parkway in Willingboro. Authorities believe at the time he was living at various addresses in the township and formerly lived in Barnegat, Ocean County.

State investigator Thaedra Frangos said although the state was able to recover about $293,326 of the money, she found Costello also spent the cash on a new $40,000 Lincoln Town Car, investments and living expenses.

Nearly $100,000 of the ill-gotten money was stolen from Costello by a bank teller who helped him set up his accounts, authorities said.

Lisa Jarvis, 33, of Norcross, Ga., was sentenced to three years in state prison for her guilty plea to theft and must pay restitution, Burlington County Prosecutor Andrew McDonnell said.

Jarvis created a duplicate debit card for Costello’s account at the local TD Bank to keep for herself, and then slowly siphoned $98,000 over the course of two years, authorities said.

She made more than 100 purchases, including $2,000 in merchandise from a Wal-Mart in Atlanta after her move south, according to court records.

When Costello realized Jarvis was stealing from him, he went to police, a move that would ultimately lead to charges against both of them. Investigators learned that Costello, who listed that he was a telemarketer on his tax returns, was not employed and not entitled to the lucrative return.

While he filed four returns, he received only one, for $545,384, authorities said.

“While clearly there is a history of psychiatric issues with Mr. Costello, this behavior was very calculating,” McDonnell said. “We’re talking about four different returns.”

Authorities had to search for Costello for six months after he filed the initial charges against Jarvis and learned he could be in trouble with the law, too. He was found living outside a Washington, D.C., transportation center in November 2011 and was extradited to New Jersey. He has been held since at the Burlington County Jail in Mount Holly.

Covert cited Costello’s mental health history in weighing the sentence imposed, saying he had been treated and hospitalized several times from 1996 to 2011.

His public defender, Bonnie Geller-Gorman, said Costello needs help and hopes he gets it in prison. She argued that no restitution be imposed because he is “beyond indigent … destitute” and has no ability to pay the state back.

“It boggles my mind that anyone could get that amount out of the state with a handwritten return,” Geller-Gorman said. “That’s a tremendous amount of money, and I hope someone at the state is watching out for the taxpayers’ dollars.”

Costello, standing shackled in an orange jail jumpsuit, said only, “I’m sorry,” when given the opportunity to address the court.

Covert did not order the restitution, but did order the amount owed be converted into a civil judgment so that if Costello comes into money in the future, the state could recoup some of its losses.

“By his actions, he defrauded every hardworking taxpayer of the state of New Jersey,” Burlington County Prosecutor Robert D. Bernardi said. “This should serve as a lesson to those who might be considering taking the same actions. You will eventually be caught and brought to justice.”

The investigation was conducted by the New Jersey Treasury Department’s Office of Criminal Investigations and Homeland Security and the Prosecutor’s Office’s financial crimes unit.

“This joint investigation ... illustrates how law enforcement works together to protect the honest taxpayers of the state,” said Charles Giblin, special agent in charge of the Treasury Department’s Office of Criminal Investigations. “We will continue to actively pursue and prosecute with our partners those who commit these types of crimes.”

Danielle Camilli: 609-267-7586; email: dcamilli@calkins.com;

Twitter: @bctdanielle

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